Friday, December 07, 2012

IT IS a grimly familiar story: crowded production lines, an electrical short-circuit, flammable chemicals, faulty fire extinguishers, stairways blocked by piles of clothes, exits barred, workers—mostly female—trapped, asphyxiated, burned, or forced to jump to their deaths. The hellish blaze in the Tazreen garment factory on 25th November shocked Bangladesh, but it did not surprise.

In the booming megalopolises of the emerging economies, such clothes factory fires are common. On one night in September, almost 300 people, including many children, were killed in two separate blazes in Karachi and Lahore.

After the Pakistani disaster, The Times of India described the wave of garment factory fires as a “distinctly South Asian” tragedy. There is some truth in this. The industry’s centre of gravity is moving south. Labour costs in China, once the preferred location for clothes production, are rising. This pushes low-skill manufacturing jobs into India, Pakistan, Cambodia, Vietnam and, in particular, Bangladesh, where clothes now make up 75% of exports. Indeed, most people reading this post will have one or more items made there in their closet. Compliance standards, says McKinsey, are generally improving, but remain very mixed. The Clean Clothes campaign estimates that over 700 Bangladeshis have perished in garment factory fires over the past decade.

The causes of the fires reflect the industrial circumstances. Productivity in these countries is low, squeezed Western consumers want inexpensive clothes, and factories—and entire economies—must therefore compete on price. “Fast fashion” chains such as Zara, the Gap and H&M specialise in rushing new styles from catwalks to retail outlets at pace. This necessitates bursts of production at crucial moments in the style cycle. Large orders are sub-contracted to multiple manufacturers: the chain of intermediaries leading from Main Street to the labourer can be long and opaque. Factory owners take on extra staff, leading to over-crowding. The pressure to fulfil orders is intense. Speed matters. Safety standards slip.

Such was the backdrop to the Tazreen fire, which killed 112. Like many, the factory was working flat-out to meet the Christmas rush in the West. Survivors claim that managers locked the doors to prevent workers from stealing stock as they fled. Wal-Mart, the American retail giant, had terminated its relationship with the factory due to safety concerns. But, it reports, one of its sub-contractors continued to use Tazreen without its consent: Wal-Mart clothes were still being produced there months after the firm had deemed the plant unsafe. Smouldering remains of the store’s “Faded Glory” range were found in the embers.

Whilst regretting the loss of life, Wal-Mart continues to blame the unnamed sub-contractor (believed to be Simco Bangladesh Ltd) whilst stressing that it monitors its supply chains closely. This is not entirely convincing. The McKinsey report on Bangladesh’s clothes industries, published in November 2011, notes (emphases added) that:

"The regional concentration of Bangladesh’s RMG [ready made garment] industry provides a relatively high visibility of the compliance situation. CSR [corporate social responsibility]stakeholders can visit a significant amount of suppliers within a relatively short time. This situation offers more opportunity to create transparency regarding supplier conduct than would be possible in countries such as China and India, as their industry locations are much more spread out. International buyers should also make active use of unannounced visits to achieve transparency."

November’s blaze occurred in Ashulia, the heart of the Bangladesh’s manufacturing industry. And it was not a one-off. In 2010 a fire at another Ashulia factory used by Wal-Mart killed 27. The risks of inadequately monitored sub-contractors are well-documented. Wal-Mart is the world’s largest retailer—surely it can do better?

Others do. American Apparel says it “minimises” its use of sub-contractors. Nike, once known for washing its hands of abuses in its supply chain, is now a model of good practice: it has created an interactive online map listing every one of its production sites. Apple has recently commissioned the Fair Labour Association to produce a full audit of where its gizmos and components are made. Tchibo and PVH, the owners of Calvin Klein and Tommy Hilfiger brands, are parties to the Bangladesh Fire and Building Safety Agreement. This commits them to work with owners, unions and the authorities to operate a strict regime of mandatory inspections, information sharing and factory upgrades. Despite a public petition calling on it to do so, Wal-Mart, along with H&M and the Gap, is yet to sign.

Today, a culture of impunity persists. “The owners go unpunished and so they don’t care about installing enough security facilities,” says Tahmina Rahman, general secretary of the Bangladesh Garment Workers Federation. Pressure from retailers can alter that: “things are changing and if I do not comply, I cannot get the orders”, said one factory boss in an interview with McKinsey. But only when retailers get a tight grip on their supply chains can they exert this pressure. The “South Asian tragedy” is not over until they do.